Future of muni operations hazy after SunTrust and BB&T merge

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The municipal bond shops at SunTrust Banks Inc. and BB&T Corp. are far from the center of the banks' massive merger.

The southern regional banks Thursday announced a definitive agreement to combine under a new name in a $66 billion all-stock deal.

The new company will be headquartered in Charlotte, North Carolina, and will open as the sixth-largest U.S. bank based on assets and deposits. The merger is expected to close in the fourth quarter of 2019, subject to customary regulatory approvals and approval by each company’s shareholders.

Both banks have municipal financing operations: SunTrust Robinson Humphrey and BB&T Capital Markets.

BB&T did not respond to a phone call and email seeking comment. SunTrust corporate spokesman Michael McCoy declined to say how the capital divisions will be treated in the merger.

“For now, it remains business as usual, and we look forward to sharing more as we move through the integration process,” McCoy said Thursday.

The massive scale of the combined commercial banks stands in contrast to their municipal bond businesses.

BB&T ranked 29th nationally as managing underwriter in 2018, credited with $1.24 billion in 61 deals, according to Refinitiv. In 2017, the bank ranked 31st as managing underwriter credited with $1.19 billion in 59 deals.

SunTrust Robinson Humphrey ranked 72nd as managing underwriter with $85 million in 10 deals during 2018. It ranked 56th in 2017 with $325.9 million in 15 bond issues.

In 2018, BB&T was the top underwriter of charter school bonds with $740 million in 23 issues, according to a BB&T bank executive who asked not to be named.

“They have three specialty practices, all high yield,” the executive said, adding that those practices are in the charter school, senior citizen facility, and housing sectors.

In November, BB&T was book-runner on the largest charter bond issue in U.S. history — a $346 million deal for International Leadership of Texas.

“BB&T has a leadership role in the charter school underwriting sector nationally,” said Drew Masterson, financial advisor on the deal for his firm Masterson Advisors. “This merger [with SunTrust] will clearly strengthen and expand their overall footprint.”

On Thursday, House Financial Services Committee Chairwoman Maxine Waters, D-Calif., told American Banker that the proposed BB&T-SunTrust Bank merger raises “many questions” and should be scrutinized by regulators, Congress and the public.

Waters’ statement criticized the bill Trump signed into law in May that provided relief from the Dodd-Frank Act’s regulations, which was targeted at community banks. She called the bill a “broader deregulatory giveaway to large banks that would fuel mergers, accelerate industry consolidation, and make it more difficult for community banks to compete.”

BB&T is based in Winston-Salem, North Carolina, while SunTrust is headquartered in Atlanta.

When the merger closes, the new bank will have about $442 billion in assets, $301 billion in loans, and $324 billion in deposits serving more than 10 million households in the U.S.

“This is a true merger of equals, combining the best of both companies to create the premier financial institution of the future,” BB&T Chairman and Chief Executive Officer Kelly S. King said in a statement.

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